The real estate market is moving again as the coronavirus pandemic has slowed down, but being new to the market in Toronto can pose a series of questions. Whether it comes to buying or renting, prices have gone a bit lower, while opportunities are more diversified than ever. Having a few clues about what is better can push you in the right direction, so here is everything you need to know upfront.
Price to rent considerations for your next move
Price-to-rent considerations are more important than other aspects of this market but are often overlooked. This ratio helps people determine whether it is better to buy or rent in certain areas. It has nothing to do with your actual affordability and does not cover bills or your income, but it can show how to go if you are unsure whether you should buy or rent.
This ratio is calculated in a very simple manner. Practically, the overall buying price must be divided by the rental price for the year. It also counts how many years of rent it would take to buy or pay for the property.
Do the math, and if the ratio is under 15, it might be better to buy a condo in the area. If the ratio goes over 20, renting could be the better choice.
Renting might be a better choice.
Generally speaking, purchasing a condo in the central part of Toronto would be equal to just over 20 years of renting. Given these numbers, those who do a proper analysis will find renting a better opportunity than buying.
Specific neighborhoods in Toronto make it almost evident that renting is the way to go. For instance, C08, C02, C09, and C12 have a ratio of about 35, meaning buying is one of the least profitable choices out there – unless you are an actual investor interested in buying left and right.
Bottom line, while some neighborhoods may seem similar in facilities and costs, this ratio can make the difference. Whether you are after condos in Yorkdale or condos in East York, you seriously need to do your homework upfront.
Are you seeking ownership? Go east or west.
Just like there are areas where renting is better than buying, there are also some neighborhoods where you would be better off buying. Two specific neighborhoods make excellent investment areas if you want to climb on the real estate leader – E03 and E10. With a ratio of 15 only, the buying price equals about 15 years’ worth of paying rent. On the other hand, E11 has a ratio of about 17, which is also suitable for those interested in buying their own homes.
The western side of Toronto is not to be overlooked either, as there are some good opportunities there. The ratio goes up to about 17. W05 is worth some attention, as well as W10 – West Humber-Claireville or Rexdale-Kipling.
While this ratio is a good indicator, there are other things to consider when weighing your options. Your financial goals and current situation are just as crucial in the process. There are some benefits to each opportunity. For example, owning a home gives you the potential of value appreciation – plus, it is not money down the drain either. You also have the freedom to improve it and customize it.
At the same time, renters have more flexibility so that you can move anytime, anywhere.
In the end, no matter what you are after, there are great opportunities on each side of the story, but the location seems to make an incredible difference.